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What is your profit margin?

12-11-2007, 09:40 PM

Just starting out we ask what should we be charging? And the only way to know how much to charge is to figure out what your costs are first.
Then determine your profit margin from there. That should be right.

Well no one ever says what kind of profit they are making per hour after expenses. Shouldn&#39;t there be a general range we should all be in? Of course different parts of the country are going to be different but we should all be in the same range.
Do you agree?

Can some of you guys that have this down tell us what kind of profit margin newer LCOs should be shooting for.
I have found what works good for me for now.

Hopefully this makes sense.

Rob
Green Image Lawn & Landscape

\"If you don't feel the same way about Friday nights as you do Sunday nights, then you are not doing the right thing.\"

Quote[/b] ]Well no one ever says what kind of profit they are making per hour after expenses. Shouldn&#39;t there be a general range we should all be in? Of course different parts of the country are going to be different but we should all be in the same range.
Do you agree?

Hi Rob,

You know that is a very good point. We do often talk about shooting for a &#036;60 per hour fee but the profit margin could vary dramatically depending on your expenses.

Comment

Quote[/b] (FourSeasons @ Dec. 17 2007,11:18)]No replies to this.
Does that mean no one has it figured out?
Or no one wants to share?

I don&#39;t have it completely figured it out but i have a general idea.

Hey Rob,

I&#39;m not sure if I understand your question 100% Here are some accounting tips so you may find your PROFIT MARGINS.

Month-to-month these may vary. It depends on the cost of doing business, A/R (accounts receiveable), A/P (accounts payable and/or Expense Accounts along with Purchase Accounts) these all factor into your P&L (Profit & Loss).

Another way is to take all your cutting clients total all income from them, subtract your total cost for them (FUEL), this would be close. You can&#39;t use labor/time as a factor for this application. You can do this with each type of job/customer you may have, this will tell you how much you made profit and then find the profit % for each one. There is your Profit margin for each service you provide.

Hope this helps or is what your looking for.

Comment

I think he is talking about.....if you already know your costs of doing business.....what percentage do you add in to make your profit. How much percentage do YOU add to your total cost of a job to make YOUR profit? I know mine varies from job to job and person to person. I try to make as much as I can on each job. When you tell the person the cost....and they wince....that&#39;s what I look for&#33;
Basically, do you add 15% to total cost for profit? More? Less? What is YOUR profit margin?

Comment

Well, it would seem to me that if you know your cost to do business, then you could figure out your "profit margin" by taking your cost of business per month, divide it by the number of jobs you do, then you&#39;ll have a rough estimate of how much you&#39;re paying to do a job... then just subtract that from what you&#39;re getting payed to do the job.

Right? ...or was I WAY off there...?

Comment

Quote[/b] (caseyshields @ Dec. 17 2007,3:28)]I think he is talking about.....if you already know your costs of doing business.....what percentage do you add in to make your profit. *How much percentage do YOU add to your total cost of a job to make YOUR profit? *I know mine varies from job to job and person to person. *I try to make as much as I can on each job. *When you tell the person the cost....and they wince....that&#39;s what I look for&#33;
Basically, do you add 15% to total cost for profit? *More? *Less? *What is YOUR profit margin?

When doing profit %&#39;s on large jobs such as Hardscapes and Landscapes you would have to figure what your area can take

For ex. most landscape companies buy wholesale prices and use retails pricing for the estimate for plants total cost to customers and use a multiplier of 2 for the TOTAL COST of said job, this will in return give you approx 25-30% profit but after you figure your labor cost into it your profit margin would be realisticly about 15% total profit. This is a common practice around here.

For Hardscape jobs I do it a little different. I total the cost of all materials, labor and equipment rentals (basicly all expenses) find the total add 15% for profit and 8% to that for overhead (my run time, permits, fees, office paperwork, etc).

Remember to do this PART, this is VERY IMPORTANT: If you own your equipment,(mini-skidsteer, compactor, quick-cut saw etc.) you need to add the going rate from local rental company for each day that equipment is on the job to the bid.

Comment

Quote[/b] (pmblair @ Dec. 17 2007,6:15)]Well, it would seem to me that if you know your cost to do business, then you could figure out your "profit margin" by taking your cost of business per month, divide it by the number of jobs you do, then you&#39;ll have a rough estimate of how much you&#39;re paying to do a job... then just subtract that from what you&#39;re getting payed to do the job.

Right? *...or was I WAY off there...?

Yes Pat you are some what correct. The way you explained it would get you close, it would at the very least tell you if you should stay in business or not or at least tell you if you need to increase your pricing. As I have tried to explain a GOOD accounting system is crucial in any business, TRACT ALL expenses. this way you can accually see where you lost money and where you made money, wheater you have a solid P & L or not. A solid business continues to be solid by making appropiate changes as needed and this begins with solid accounting reports.

Comment

Quote[/b] (FourSeasons @ Dec. 18 2007,12:43)]This is great info for people that aren&#39;t sure how to find what their profit is or needs to be.
But I wanted to see what you guy&#39;s average profit margin is.
If you dont mind sharing.

]Actually this probably is just a one number/word answer.

15-20 % depends on the job

Comment

Is it the same as if maybe you were a journeyman in some trade or somewhere along those lines. Income wise? Or does it pass that? If it was about the same, what do you like about owning a business in this industry that keeps you in it instead of just going to work everyday for someone else and not have to worry about the problems that go along with running a business. And maybe making the same amount of income.

Rob
Green Image Lawn & Landscape

\"If you don't feel the same way about Friday nights as you do Sunday nights, then you are not doing the right thing.\"

Comment

Is it the same as if maybe you were a journeyman in some trade or somewhere along those lines. Income wise? Or does it pass that? If it was about the same, what do you like about owning a business in this industry that keeps you in it instead of just going to work everyday for someone else and not have to worry about the problems that go along with running a business. And maybe making the same amount of income.

You are thinking of the term "profit" as YOUR paycheck. This is not correct. PROFIT is the money left over after EVERYTHING has been paid....including payroll. Payroll (including your pay as well as employee pay) is an expense.

Comment

Is it the same as if maybe you were a journeyman in some trade or somewhere along those lines. Income wise? Or does it pass that? If it was about the same, what do you like about owning a business in this industry that keeps you in it instead of just going to work everyday for someone else and not have to worry about the problems that go along with running a business. And maybe making the same amount of income.

You are thinking of the term "profit" as YOUR paycheck. This is not correct. PROFIT is the money left over after EVERYTHING has been paid....including payroll. Payroll (including your pay as well as employee pay) is an expense.

This is 100% correct. Profit is what is left after you pay your self and all other expense. If you are only making enough money to cover your business expenses and what is left is your paycheck then the profit is 0%. Profit is what the company made. You must be able to seperate the two, you never touch profit for personal uses, profit is what makes the company grow, if you are comfortable with this then it&#39;s all good and works for you cool, but if you want to grow you must leave some money for the company. Remember you have to pay taxs on what you earned personaly from the business (owner draws) and what the business earned (profit).

When I stated my company makes about 15-20% profit after I checked it year-to-date it is higher. I pay myself monthly just as I was a bill, because I am a bill to the company. You must be disciplined at this, seeing all this money you have earned and wanting to spend some, you cant do it personally not saying you can buy new or newer equipment or reimbursement of owner contributions to the company. If your company has no profit and say you only have one truck and the trainy go out, cost &#036;3k (I know from experience) now what are you to do about keeping up with your customers and getting your truck back on the raod? Profit should be a cushion, for hard times and unexpected happenings.

I know this was lengthly but I hope it brought some light to the topic, this is a GREAT ONE.

Quote[/b] ]
Tim,

Is it the same as if maybe you were a journeyman in some trade or somewhere along those lines. Income wise? Or does it pass that? If it was about the same, what do you like about owning a business in this industry that keeps you in it instead of just going to work everyday for someone else and not have to worry about the problems that go along with running a business. And maybe making the same amount of income.

To answer Rob I would have to say no, not at this point in my life, I could never work full time for anyone. I have been a business owner for 20+years and I don&#39;t know if I could work for someone else.

Comment

Quote[/b] ]You are thinking of the term "profit" as YOUR paycheck. This is not correct. PROFIT is the money left over after EVERYTHING has been paid....including payroll. Payroll (including your pay as well as employee pay) is an expense.

Good Point. You&#39;re right.

Rob
Green Image Lawn & Landscape

\"If you don't feel the same way about Friday nights as you do Sunday nights, then you are not doing the right thing.\"